The Federal Trade Commission ordered Grubhub to pay $25 million in settlement charges after being accused of deceiving customers about delivery costs and blocking access to their accounts and funds, lying to workers about how much they would make, and deceptively listing restaurants on its platform without permission.
The settlement requires Grubhub to pay $140 million, but the judgment was partially suspended based on the company’s inability to pay the full amount. If the FTC learns that Grubhub misrepresented how much money it has, the full amount would become due immediately.
Almost all of the $25 million will be used to refund consumers harmed by Grubub’s alleged actions.
The agency mandated that the third-party delivery company make significant changes to operations, including telling consumers the full cost of delivery, being transparent about driver pay, and listing restaurants only with consent.
“Our investigation found that Grubhub tricked its customers, deceived its drivers, and unfairly damaged the reputation and revenues of restaurants that did not partner with Grubhub—all in order to drive scale and accelerate growth,” FTC chair Lina M. Khan said in a statement. “Today’s action holds Grubhub to account, putting an end to these illegal practices and securing nearly $25 million for the people cheated by Grubhub’s tactics. There is no ‘gig platform’ exemption to the laws on the books.”
The FTC said Grubhub added restaurants to its platform without permission since at least 2019. The aggregator had as many as 325,000 unaffiliated restaurants on its platform—more than half of all of the available restaurants on the platform.
The company allegedly did this to drive growth (the more restaurants that appear to be available, the more likely consumers will use it). However, the FTC also claimed this growth happened at the expense of customers, who paid more in fees and experienced several ordering problems, and also at the harm of restaurants, who had to deal with consumer criticisms and experienced damaged reputations and revenue.
When restaurants contacted Grubhub demanding to be removed from the platform, the company would try to sell them paid partnerships instead, according to the FTC.
Additionally, the FTC claimed Grubhub advertised for years that customers will pay a single, low-cost amount for a delivery order, only to be met with junk fees and a price that is more than double what was originally advertised. Grubhub allegedly described these fees as “service fees” or “small order fees,” but the agency said they are really delivery fees in disguise.
Grubhub was accused of regularly blocking customers from accessing large balances of gift card funds without warning as well, the FTC said.
In terms of driver pay, Grubhub’s advertisements allegedly used highly inflated hourly rates to attract workers. The FTC used an example of New York, where the company claimed drivers could make up to $40 per hour when the actual median pay was around $10 per hour. In this case, only one in 1,000 drivers made $40 per hour. In Chicago, Grubub allegedly promised up to $26 per hour, when the median was $11 per hour. Less than 2 percent of drivers made the advertised amount.
“This settlement is the culmination of a multi-year investigation into deceptive and illegal business practices perpetrated by Grubhub,” said Illinois Attorney General Kwame Raoul in a statement. “I thank FTC Chair Lina Khan for another successful partnership between our offices that has resulted in relief for Illinois consumers, and I remain committed to holding businesses like Grubhub accountable for their deceptive business practices.”
In November, Just Eat Takeaway.com agreed to sell Grubhub for $650 million to Wonder. That’s about $6.52 billion less than what it bought the company for in 2020. That’s a 90 percent loss.
